Russia Weighs Dividend Change at State Companies Amid Crisis

  • Dividend payout may be set at minimum 25% of profit under IFRS
  • State earlier sought dividend increase to 35% starting 2016

Russia is drafting new rules for dividend payouts by state-run companies amid the country’s first recession in six years.

The government may oblige companies from Gazprom PJSC to VTB Bank PJSC to distribute at least 25 percent from profit calculated under international accounting standards. A draft decree on the changes is being prepared by the economy and finance ministries as well as other authorities, Elena Lashkina, a spokeswoman for the Economy Ministry in Moscow, said by e-mail late Wednesday. The new rules will apply from the moment the decree is published, she said without elaborating.

The government now obliges state-run companies to pay out at least 25 percent of their profit under Russian accounting standards, with some exceptions. Before the collapse in oil prices tipped the economy into its first recession since 2009, the Russian authorities pushed for a dividend increase in a bid to lure foreign investors and boost budget revenue.

“That’s really ground-breaking news for Gazprom, maybe the best one in the past year,” Maxim Moshkov, an energy analyst for UBS Group AG in Moscow, said by phone. While the government considered higher dividend policies two years ago, the possible shift from Russian to international accounting standards -- if the plan is approved for 2016 -- is positive news for the market, he said.

Additional Hedge

The changes discussed by officials could also provide an additional hedge for the government and investors. Companies would pay dividends from their profit based on international standards if it’s higher than under domestic accounting rules, without exceptions, Interfax news service reported, citing an unidentified person with knowledge of the matter.

The companies were due to pay at least 35 percent of profit based on International Financial Reporting Standards from 2016, according to a plan unveiled by the Finance Ministry in September 2013. That would have more than tripled the budget’s earnings from dividends to almost 761 billion rubles ($11.7 billion), according to government estimates at the time, because some companies, including Gazprom, usually report higher gains under international standards.

Last year, the estimate was cut as officials wrangled over whether the new rules could be delayed.

The state may agree on dividend cuts for some oil and gas companies to compensate for a planned tax increase next year, Vedomosti newspaper reported in October, citing unidentified officials.

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